CSR Policy Rules 2014 as Amended Sept 2022

Companies CSR Policy Rules 2014 as amended by the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2022 dated 20th September, 2022.

Rule 3, Rule 4 and Rule 8 in the Companies Corporate Social Responsibility (CSR) Policy Rules 2014 amended by the Companies CSR Policy Amendment Rules, 2022 vide Notification No. G.S.R. 715(E), dated 20.09.2022.

Rule 2, Rule 3, Rule 4 and Rule 6 of CSR Policy Rules 2014 has been amended by the Companies CSR Policy amendments Rules, 2021. These amendments are effective from 22nd January, 2021.

Chapter IX (Sections 128 to 138 ) of the Companies Act, 2013 deals with the provisions related to accounts of companies. Read with section 135 “Corporate Social Responsibility”. The Companies (Corporate Social Responsibility Policy) Rules, 2014 is applicable from 1st April 2014. Companies CSR Policy Rules 2014 published vide G.S.R. 129(E), dated 27-02-2014.

The Companies (Corporate Social Responsibility Policy) Rules, 2014

[CSR Policy Rules published vide G.S.R. 129(E), dated 27-02-2014 and subsequently amended vide G.S.R. 644(E), dated 12-09-2014, G.S.R. 43(E), dated 19-01-2015, G.S.R. 540(E), dated 23-05-2016, G.S.R. 895(E), dated 19-09-2018, G.S.R. 526(E), dated 24-08-2020, G.S.R. 40(E), dated 22-01-2021 and G.S.R. 715(E), dated 20-09-2022]

CSR Policy Rules: In exercise of the powers conferred under section 135 and sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules, namely: –

Rule-1: Short title and commencement

(1) These rules may be called the Companies (Corporate Social Responsibility Policy) Rules, 2014.

(2) They shall come into force on the 1st day of April, 2014.

Rule-2: Definitions

(1) In these rules, unless the context otherwise requires,-

(a) “Act” means the Companies Act, 2013 (18 of 2013);

(b) “Administrative overheads” means the expenses incurred by the company for ‘general management and administration’ of Corporate Social Responsibility functions in the company but shall not include the expenses directly incurred for the designing, implementation, monitoring, and evaluation of a particular Corporate Social Responsibility project or programme;

(c) “Annexure” means the Annexure appended to these rules;

(d) “Corporate Social Responsibility (CSR)” means the activities undertaken by a Company in pursuance of its statutory obligation laid down in section 135 of the Act in accordance with the provisions contained in these rules, but shall not include the following, namely:-

• (i) activities undertaken in pursuance of normal course of business of the company:
  
  Provided that any company engaged in research and development activity of new vaccine, drugs and medical devices in their normal course of business may undertake research and development activity of new vaccine, drugs and medical devices related to COVID-19 for financial years 2020-21, 2021-22, 2022-23 subject to the conditions that-
  
  • (a) such research and development activities shall be carried out in collaboration with any of the institutes or organisations mentioned in item (ix) of Schedule VII to the Act;
  • (b) details of such activity shall be disclosed separately in the Annual report on CSR included in the Board’s Report;
    
• (ii) any activity undertaken by the company outside India except for training of Indian sports personnel representing any State or Union territory at national level or India at international level;
• (iii) contribution of any amount directly or indirectly to any political party under section 182 of the Act;
• (iv) activities benefitting employees of the company as defined in clause (k) of section 2 of the Code on Wages, 2019 (29 of 2019);
• (v) activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services;
• (vi) activities carried out for fulfilment of any other statutory obligations under any law in force in India;

(e) “CSR Committee” means the Corporate Social Responsibility Committee of the Board referred to in section 135 of the Act;

(f) “CSR Policy” means a statement containing the approach and direction given by the board of a company, taking into account the recommendations of its CSR Committee, and includes guiding principles for selection, implementation and monitoring of activities as well as formulation of the annual action plan;

(g) “International Organisation” means an organisation notified by the Central Government as an international organisation under section 3 of the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), to which the provisions of the Schedule to the said Act apply;

(h) “Net profit” means the net profit of a company as per its financial statement prepared in accordance with the applicable provisions of the Act, but shall not include the following, namely: –

• (i) any profit arising from any overseas branch or branches of the company, whether operated as a separate company or otherwise; and
• (ii) any dividend received from other companies in India, which are covered under and complying with the provisions of section 135 of the Act:

Provided that in case of a foreign company covered under these rules, net profit means the net profit of such company as per profit and loss account prepared in terms of clause (a) of sub-section (1) of section 381, read with section 198 of the Act;

(i) “Ongoing Project” means a multi-year project undertaken by a Company in fulfilment of its CSR obligation having timelines not exceeding three years excluding the financial year in which it was commenced, and shall include such project that was initially not approved as a multi-year project but whose duration has been extended beyond one year by the board based on reasonable justification;

(j) “Public Authority” means ‘Public Authority’ as defined in clause (h) of section 2 of the Right to Information Act, 2005 (22 of 2005);

(k) “section” means a section of the Act.

(2) Words and expressions used and not defined in these rules but defined in the Act shall have the same meanings respectively assigned to them in the Act.

[Rule 2 of CSR Policy Rules 2014 has been substituted w.e.f. 22.01.2021 by the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021]

Rule-3: Corporate Social Responsibility

(1) Every company including its holding or subsidiary, and a foreign company defined under clause (42) of section 2 of the Act having its branch office or project office in India, which fulfills the criteria specified in sub-section (1) of section 135 of the Act shall comply with the provisions of section 135 of the Act and these rules:

Provided that net worth, turnover or net profit of a foreign company of the Act shall be computed in accordance with balance sheet and profit and loss account of such company prepared in accordance with the provisions of clause (a) of sub-section (1) of section 381 and section 198 of the Act.

[Provided further that a company having any amount in its Unspent Corporate Social Responsibility Account as per sub-section (6) of section 135 shall constitute a CSR Committee and comply with the provisions contained in sub-sections (2) to (6) of the said section.]

[Second proviso in sub-rule(1) in Rule 3 newly inserted and sub-rule(2) in Rule 3 omitted by the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2022 vide Notification No. G.S.R. 715 dated 20.09.2022]

Rule-4: CSR Implementation

[Sub-rule(1) in Rule 4 substituted by the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2022 vide Notification No. G.S.R. 715 dated 20.09.2022]

(2) (a) Every entity, covered under sub-rule (1), who intends to undertake any CSR activity, shall register itself with the Central Government by filing the form CSR-1 electronically with the Registrar, with effect from the 1^st day of April 2021:

Provided that the provisions of this sub-rule shall not affect the CSR projects or programmes approved prior to the 1st day of April 2021.

(b) Form CSR-1 shall be signed and submitted electronically by the entity and shall be verified digitally by a Chartered Accountant in practice or a Company Secretary in practice or a Cost Accountant in practice.

(c) On the submission of the Form CSR-1 on the portal, a unique CSR Registration Number shall be generated by the system automatically.

(3) A company may engage international organisations for designing, monitoring and evaluation of the CSR projects or programmes as per its CSR policy as well as for capacity building of their own personnel for CSR.

(4) A company may also collaborate with other companies for undertaking projects or programmes or CSR activities in such a manner that the CSR committees of respective companies are in a position to report separately on such projects or programmes in accordance with these rules.

(5) The Board of a company shall satisfy itself that the funds so disbursed have been utilised for the purposes and in the manner as approved by it and the Chief Financial Officer or the person responsible for financial management shall certify to the effect. (6) In case of ongoing project, the Board of a Company shall monitor the implementation of the project with reference to the approved timelines and year-wise allocation and shall be competent to make modifications, if any, for smooth implementation of the project within the overall permissible time period.

[Rule 4 of CSR Policy Rules 2014 has been substituted w.e.f. 22.01.2021 by the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021]

Rule-5: CSR Committees

(1) The companies mentioned in the rule 3 shall constitute CSR Committee as under.-

• (i) a company covered under sub-section (1) of section 135 which is not required to appoint an independent director pursuant to sub-section (4) of section 149 of the Act, shall have its CSR Committee without such director;
• (ii) a private company having only two directors on its Board shall constitute its CSR Committee with two such directors;
• (iii) with respect to a foreign company covered under these rules, the CSR Committee shall comprise of at least two persons of which one person shall be as specified under clause (d) of sub-section (1) of section 380 of the Act and another person shall be nominated by the foreign company.

(2) The CSR Committee shall formulate and recommend to the Board, an annual action plan in pursuance of its CSR policy, which shall include the following, namely:-

• (a) the list of CSR projects or programmes that are approved to be undertaken in areas or subjects specified in Schedule VII of the Act;
• (b) the manner of execution of such projects or programmes as specified in sub-rule (1) of rule 4;
• (c) the modalities of utilisation of funds and implementation schedules for the projects or programmes;
• (d) monitoring and reporting mechanism for the projects or programmes; and
• (e) details of need and impact assessment, if any, for the projects undertaken by the company: Provided that Board may alter such plan at any time during the financial year, as per the recommendation of its CSR Committee, based on the reasonable justification to that effect.

[Sub-rule(2) of Rule 5 of CSR Policy Rules 2014 has been substituted w.e.f. 22.01.2021 by the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021]

Rule-6: [Omitted w.e.f. January 22, 2021]

[Rule 6 of CSR Policy Rules 2014 has been omitted w.e.f. 22.01.2021 by the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021]

Rule-7: CSR Expenditure

(1) The board shall ensure that the administrative overheads shall not exceed five percent of total CSR expenditure of the company for the financial year.

(2) Any surplus arising out of the CSR activities shall not form part of the business profit of a company and shall be ploughed back into the same project or shall be transferred to the Unspent CSR Account and spent in pursuance of CSR policy and annual action plan of the company or transfer such surplus amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year.

(3) Where a company spends an amount in excess of requirement provided under sub-section (5) of section 135, such excess amount may be set off against the requirement to spend under sub-section (5) of section 135 up to immediate succeeding three financial years subject to the conditions that –

• (i) the excess amount available for set off shall not include the surplus arising out of the CSR activities, if any, in pursuance of sub-rule (2) of this rule.
• (ii) the Board of the company shall pass a resolution to that effect.

(4) The CSR amount may be spent by a company for creation or acquisition of a capital asset, which shall be held by –

• (a) a company established under section 8 of the Act, or a Registered Public Trust or Registered Society, having charitable objects and CSR Registration Number under sub-rule (2) of rule 4; or
• (b) beneficiaries of the said CSR project, in the form of self-help groups, collectives, entities; or
• (c) a public authority: Provided that any capital asset created by a company prior to the commencement of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, shall within a period of one hundred and eighty days from such commencement comply with the requirement of this rule, which may be extended by a further period of not more than ninety days with the approval of the Board based on reasonable justification.

[Rule 7 of CSR Policy Rules 2014 has been substituted w.e.f. 22.01.2021 by the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021]

Rule-8: CSR Reporting

(1) The Board’s Report of a company covered under these rules pertaining to any financial year shall include an annual report on CSR containing particulars specified in Annexure I or Annexure II, as applicable.

(2) In case of a foreign company, the balance sheet filed under clause (b) of sub-section (1) of section 381 of the Act, shall contain an annual report on CSR containing particulars specified in Annexure I or Annexure II, as applicable.

(3) (a) Every company having average CSR obligation of ten crore rupees or more in pursuance of subsection (5) of section 135 of the Act, in the three immediately preceding financial years, shall undertake impact assessment, through an independent agency, of their CSR projects having outlays of one crore rupees or more, and which have been completed not less than one year before undertaking the impact study.

(b) The impact assessment reports shall be placed before the Board and shall be annexed to the annual report on CSR.

(c) A Company undertaking impact assessment may book the expenditure towards Corporate Social Responsibility for that financial year, which shall not exceed two per cent of the total CSR expenditure for that financial year or fifty lakh rupees, whichever is higher.

[Clause (c) in sub-rule(3) in Rule 8 amended (substituted) by the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2022 vide Notification No. G.S.R. 715 dated 20.09.2022]

[Rule 8 of CSR Policy Rules 2014 has been substituted w.e.f. 22.01.2021 by the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021]

Rule-9: Display of CSR activities on its website

The Board of Directors of the Company shall mandatorily disclose the composition of the CSR Committee, and CSR Policy and Projects approved by the Board on their website, if any, for public access.

[Rule 9 of CSR Policy Rules 2014 has been substituted w.e.f. 22.01.2021 by the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021]

Rule-10: Transfer of unspent CSR amount

Until a fund is specified in Schedule VII for the purposes of subsection (5) and(6) of section 135 of the Act, the unspent CSR amount, if any, shall be transferred by the company to any fund included in schedule VII of the Act.

[Rule 10 of CSR Policy Rules 2014 has been newly inserted w.e.f. 22.01.2021 by the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021]